The Staggering Cost Of Making An Auto Insurance Claim

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I write about how to maximize your automotive investment and more.

Here’s one more incentive to practice safe driving techniques with a religious fervor. Filing a single claim of $2,000 or more will cause an average motorist’s car insurance premiums to skyrocket by 41 percent, according to a recent study conducted for the website InsuranceQuotes.com.

And that’s just the national average. The study found that residents of California are subject to the stiffest penalties for, well, taking advantage of coverage for which one already pays dearly, with a single claim triggering a budget-busting 86 percent average rate boost. Those living in Maryland tend to suffer the mildest financial hardship after filing a car insurance claim, with a typical jolt of 22 percent.

According to the National Association of Insurance Commissioners (NAIC), the average car insurance premium in the U.S. is $815; do the math and you'll find that means making a claim would cost the typical policyholder an additional $335 more per year in premiums.

This is all based on the actuarial premise that someone filing an insurance claim is more likely to get into another accident than a policyholder who’s never opened the umbrella of coverage, so to speak.

So what about an unlucky motorist who, in fact, follows up with a second car-insurance claim? He or she hits the proverbial ball out of the old park with a doubleheader of a premium upsurge at a national average 93 percent. "Many consumers underestimate the consequences of making claims because they can affect your rate for years," says Laura Adams, a senior analyst at insuranceQuotes.com. "If you get a premium hike for making a small claim, that could hurt your finances over the long run."

Bodily injury and property damage tend to be the costliest claims in terms of premium enhancement, according to InsuranceQuotes.com data, at an average 45 percent and 41 percent boost, respectively, while simple claims for comprehensive (non-collision) damage triggering comparatively minor bumps at just two percent.

Here are the states where those filing a single car insurance claim can expect to see the highest rate increases (based on a $2,000 claim against one’s bodily injury coverage):

California — 86 percent

Massachusetts — 83 percent

New Jersey — 69 percent

North Carolina — 58 percent

Minnesota — 52 percent

And here are the five states where drivers can subject to the lowest pocketbook penalties under the same circumstances:

Maryland — 22 percent

Michigan — 25 percent

Montana — 27 percent

Oklahoma — 27 percent

Mississippi — 28 percent

Click here for the full study with average increases noted for all 50 states and the District of Columbia.

As mentioned above, these rate increases are hardly a one-time deal. Experts say consumers can expect such premium hikes to stay in effect for between three to five years – depending on the severity of the underlying incident – after which they should drop to their previous levels, assuming of course one has not filed another claim in the meantime.

As we’ve long pointed out, the prudent path to follow whenever insurance premiums rise for any reason is to shop around to find a better rate elsewhere. Different companies have varying underwriting standards, with some being more forgiving than others in this regard. And make sure you’re receiving all of a given carrier’s available discounts to which you may be entitled.

Of course, a given driver’s auto insurance premiums are largely based on a combination of factors, including age, gender, geographical location, miles driven per year and driving record. We can only shudder to think of the budget-busting car insurance bill a family might face in a given year after filing one or two claims, adding a male teen driver to the family policy, receiving at least one moving violation and moving from a sleepy town in Maryland to a crowded corner of Los Angeles, California. Anyone for public transportation?

The Fine Print: The above study was conducted for InsuranceQuotes.com by Quadrant Information Services, and was based on data culled from six large carriers in all 50 states and the District of Columbia. Averages are based on a 45-year-old married female motorist driving a sedan from the 2012 model year. It’s assumed this person is employed, with a four-year college degree, an excellent credit record and currently has car insurance with policy limits of $100,000 for injury liability for one person, $300,000 for all injuries and a $500 deductible on collision and comprehensive coverage. What’s more, she has never previously filed a claim until this one, which amounts to $2,000.